Employers in private and public sector are increasingly resorting to the so-called outsourcing, i.e. contractual delegation of certain (secondary) functions or activities to outside contractors. Legal status of employees who previously performed this work with the employer depends mainly on whether there has been the transfer of the undertaking or part of the undertaking within the meaning of Directive 2001/23/EC. According to case law of the Court of Justice of the EU, in addition to the performance of the same activities, a condition is also the transfer of essential means of work or transition of employees (depending on the type of service). Since the transition of employees in this case depends on the agreement between the contracting authority and the provider of services, terms of public procurement are very important in this regard. The article addresses the question of the application or non-application of the institution of the transfer of the undertaking in cases of outsourcing in public sector, while paying attention to Slovenian and Croatian legislation and to the Directive. It also analyses the labour law status of a public servant in both cases.